Incident Overview
The company announced interim results. The six-month interim revenue for the six months ending February 2020 was 393 million, an increase of 15.9% over the previous year, and adjusted net profit of 161 million, an increase of 24.8% over the previous year. This performance is in line with the company's positive profit forecast of no less than 20% increase. The company paid 61.62 million yuan, equivalent to 0.051 yuan per share. Based on the adjusted net profit scale, the medium-term dividend payment rate reached 38.3%.
Analytical judgment:
Revenue growth mainly comes from the contribution of tuition fee growth: (1) Looking at the number of students enrolled in H1 Group in 2020, the overall number of students enrolled in H1 Group increased 2.1% year-on-year to 45,600. Among them, Huali College/Huali Vocational College/Huali Technician College increased 17.4%/-2.9%/-11.8% year-on-year to 178/198/0.8 million, respectively. In terms of per capita expenses, the 2020H1 Group's per capita tuition and accommodation expenses for half a year increased 13.4% year-on-year to 88,000 yuan. Among them, Huali College/Huali Vocational College/Huali Technician College increased 9.6%/13.0% year-on-year to 1.25/0.61/063 million yuan respectively. (2) Looking at split schools, Huali College/Huali Vocational College/Huali Technician College increased by 28.7%/9.7%/-11%, respectively.
The increase in gross margin and the decline in recurring expenses contributed to the company's profit growth faster: Looking at gross margin, 2020H1 Group's gross margin increased 1.6 pct to 57.4% year-on-year, mainly due to increased campus usage and higher per capita tuition fees. Among them, the usage rate of the Zengcheng/Yunfu campus increased 1.4/10 pct to 93.1%/25%, respectively. Looking at the cost rate, the 2020H1 Group's sales/management/financial expenses ratio after excluding listing expenses declined - 0.6/1.3/0.5pct to 3.0%/11.7%/5.8% respectively. The increase in sales expenses was mainly due to the Technician College expanding the enrollment of junior high school students and inviting students to visit the school. Judging from the adjusted performance, the adjusted net profit of the 2020H1 Group increased 24.8% year on year to 161 million, and the adjusted net interest rate increased 2.9pct to 40.9% year on year.
Investment advice
Maintaining FY2020/2021/2022 EPS at 0.27/0.35/0.44 yuan, corresponding to PE 10/8/6X respectively, the company's focus is: (1) Considering that there is a lot of room for increase in gross enrolment ratio in Guangdong Province, where it is located, so along with the expansion of the Zengcheng and Yunfu campuses and the Jiangmen campus plan to apply for new college licenses, Huali Technician College will experience enrollment growth after changing the academic system; (2) undergraduate fees are expected to increase by 10% every two years, and it is expected that vocational colleges will upgrade their undergraduate programs to be implemented; (3) Independent colleges are expected to accelerate after the transfer and decoupling of undergraduate programs; (3) Independent colleges are expected to accelerate after the transfer and decoupling Increase performance; (4) Cash on hand is plentiful, and there are expectations for future mergers and acquisitions; (5) Net interest rates may improve. Combining the company's undervaluation and higher room for growth, it maintains a “buy” rating.
Risk warning
Risk of enrollment falling short of expectations, risk of transfer progress falling short of expectations, policy risk, risk of initial release of the ban, systemic risk